Tuesday, 17 July 2007

Starbucks Forbidden from the Forbidden City!

After operating in China’s Forbidden City – a World Heritage site (and a great tourist site) – for seven years, Starbucks has decided to close its shop rather than doing business under a different brand name. From the very beginning Starbucks had faced protests from local people/authorities/visitors on the ground of “trampling” the Chinese culture. In response, Starbucks tried to be sensitive to these concerns and removed “its eye-catching white-black-and-green logo from the Forbidden City outlet”. However, this did not completely satisfy everyone. Now probably even Starbuck thought that enough is enough; after all, MNCs knows very well “what is in a name”.

MNCs often face the business dilemma similar to one that Starbucks faced in the instant case. More often that not, MNCs have to adjust their business operations in view of local social, economic, cultural or political variables. From the corporate social responsibility (CSR) perspective, the critical issue is: when do such adjustments become legally and/or morally indefensible? In other words, should Starbucks have agreed to operate inside the Forbidden City under a Chinese brand name? What was the social responsibility of Starbucks under the given circumstances? It seems that as the management of the Forbidden City was within its right to lay down rules for operating commercial ventures, Starbucks also has a right to refuse to operate under conditions which might compromise its brand name or identity. Starbucks did not behave in socially irresponsible (or unresponsive) manner by refusing to do business under a different name; in fact, the opposite might be true.

Of course, the situation might be different if Starbucks sells not coffee etc., but is the only company to sell certain life saving drugs within the Forbidden City. Then perhaps an argument could be made that such a company should continue to supply drugs without insisting on its brand name as long as it could use its name in shops outside the Forbidden City.